Anyone can be caught off guard by an unexpected illness or injury. Offering health insurance for a household employee benefits both the employee and the employer. Not only does it help employers with recruiting and retaining top quality nannies and other employees, but it safeguards against future health problems, minimizing surprise illnesses and the resulting absenteeism. For employees, having health care coverage limits out-of-pocket costs, protects assets, and safeguards future earnings.

More importantly, the Affordable Care Act (ACA) requires all individuals to have health insurance or risk being fined. The ACA can be complicated to navigate, especially within the realm of household employment. Here is a quick guide for obtaining health insurance for your nanny or other household employee.

First Steps

Before diving into the complex world of health insurance, there may be a couple of easier solutions.

How old is your nanny? Your employee may be able to be added to her parents’ policy if she is 26 years old or younger.

Is your nanny married? If so, it may be more affordable for her to be added to her spouse’s health plan, if the spouse is covered through their employer.

Obtaining coverage directly through an insurance company, or by contacting a private exchange site.

Can You Cover or Reimburse Your Employee for Premiums?

If your nanny purchases coverage on a state or federal exchange, then by law, an employer may not cover or reimburse for premium payments. If your employee buys coverage through a private exchange or directly from an insurance company, then you can pay part or all of their premiums for them directly if they are your ONLY employee.

If you have more than one employee, you can set up a plan to help cover part or all of their premiums, and receive tax-free benefits. These plans include HRAs, POPs, FSAs, and HSAs. Through these plans, no taxes are paid by either the employer or employee on health care coverage.

Important Rules

Household employers that also own their own business may want to put their nanny on their business health plan. This is not permitted, because a nanny is not employed by the business – they are a household employee. Insurance companies will likely refuse to pay any benefits if you submit a claim for a household employee through a business insurance policy.

It’s also important to know that a household employee requesting individual coverage must apply for coverage themselves – the employer cannot submit an application or other paperwork on the nanny’s behalf. The employee must fill out the forms and submit their medical information.

If you as the employer are applying for a group plan, a group application must be completed by the employer and the employee must sign the enrollment forms.

Our affiliate GTM Payroll Services’ in-house insurance brokerage can guide you through the insurance rules and regulations in New York. For more information, contact GTM at (800) 929-9213 or get a free insurance quote.

When the Affordable Care Act (ACA) went into effect several years ago, it provided transitional relief for small employers. As of July 1, 2015, it no longer offers that relief and the following Affordable Care Act changes for household employers are now true:

An employer cannot pay for an individual health insurance plan directly to an employee’s insurance company or reimburse an employee for it. Instead, they can increase their employee’s salary and allow them to set up a pre-tax deduction with a Premium Only Plan (POP). Our affiliate company, GTM Payroll services, does offer POP plans and can set up for your employee – get a free quote here.

An employer cannot discriminate and must offer the same benefit to all employees who have the same job status.

Employees are only allowed to pre-tax an individual insurance premium if it is not already tax advantaged. It’s recommended that they not pre-tax any insurance premiums paid through the Federal or State exchange.

Employers with two or more employees can no longer set up or fund a Health Reimbursement Account (HRA) to pay for their employees’ individual plans. Those with only one employee can continue to set up an HRA to help fund their employee’s individual plans.

See more information from the IRS and read about the ACA and household employment here.

Regarding the Affordable Care Act and household employees, including nannies, household employers may be wondering what, if anything, they need to do in order to comply with changes in health care laws. Below are some of the topics most likely to be relevant to household employers. Please note that rules and regulations are subject to change. A New England Nanny’s affiliate, GTM Payroll Services, will provide updates as they occur.

Household employers are NOT required to offer health insurance to their employee(s). Any employer with fewer than 50 full-time employees is not required to provide health insurance coverage to their staff.

Household employers MUST provide a Notice of Coverage Options. All employers must provide this notice to all current and any future employees. This will inform your employees about the coverage options that are available and the Health Insurance Marketplace. The Marketplace allows individuals to compare health insurance plans offered by private insurance companies. There are two sample notices that the Department of Labor provides, depending on whether you currently offer your employees health coverage or not.

Your employee is required to obtain health insurance coverage. While the law does not require you to provide coverage, your employee must be covered. Employees can purchase insurance through the Health Insurance Marketplace. To be eligible for health coverage through the Marketplace, your employee must live in the United States and be a U.S. citizen or national; if not a U.S. citizen, coverage can still be obtained, provided the requirements listed here are met. Plans and coverage will vary greatly from person to person; all of the information needed to get insurance can be found here.

If you wish to provide insurance to your employee(s), you most likely will not be able to use the Marketplace. As “sole proprietors” cannot obtain coverage for their employees through the Marketplace, most household employers are not eligible to purchase coverage for their employees. If an employer wishes to pay for coverage for their employee(s), a Health Insurance Reimbursement Arrangement may be the best option.

Household employees may qualify for a tax credit on their monthly premiums. Depending on 2015 income level and size of household, individuals may qualify for premium tax credits and other savings on a private insurance plan. Employees can apply part or all of this tax credit each month to their premium payments. The Marketplace will send the tax credit directly to their insurance company, so they pay less for premiums each month. Use this chart to help your employee see if they qualify.